Also, RBA released its Mid Year Fiscal and Monetary Outlook. Report showed that RBA sees 2014-15 deficit at $40.4 billion vs $29.8 billion gap in the May estimates. It also assumes $60 per ton iron ore price over 2 years. Inflation was moved from 2.25% in the May estimates for the second quarter to 2.5%. GDP growth in 2015-16 was unchanged from 3% in the May estimates , as well as 2.5% growth in 2014-15.
On the other hand jobless rate is now projected at 6.5% by the second quarter revised negatively from 6.25% in the May estimates. It does not project budget surplus until 2019/20.Also, China growth in 2015 is forecasted at 6.75%.
Morning part of the session on Tuesday brought China Manufacturing PMI figures and RBA Meeting Minutes. The HSBC China Manufacturing PMI dropped to a seven-month low of 49.5 in the flash reading for December, down from 50.0 in November, and below expected decline to49.8. Domestic demand slowed considerably and fell below 50 for the first time since April 2014. Price indices also fell sharply.
Earlier yesterday morning, RBA released its Meeting Minutes which were of no major impact on the markets. It was once again repeated that interest rates would stay stable for a period, giving mixed view on the economy.
Next week there will be no major data releases from Australia, with holiday season beginning. With that being the case we can expect a steadier week, with any bigger movements caused initially in the week by the US data. We would also pay attention to gold and iron ore prices.
